WSJ.com - Doing Well at Doing Good

A worthwhile read on charity giving (subscription required). If you would like to read the entire article let me know via email...

WSJ.com - Doing Well at Doing Good: "Philanthropy advisers say that for small donations -- anything under $250 -- it's not necessary to do a lot of digging because you won't be able to direct where the money goes. It will get pooled with other small gifts for the charity's general use. At this level, most experts advise searching out a well-established local or national charity. They also say it's best to move up to a higher level of donations, even if it means giving every other year. This will help you to be able to designate how your money is spent -- and potentially save you from some hassles.
'It's much better to consolidate your giving,' says Charity Navigator's Mr. Stamp. He says charities often sell their lists of small donors to other charities -- resulting in more solicitations for the donors -- because they feel they won't get larger donations from them and can make money this way.
Most nonprofits and philanthropy consultants consider a major gift to start around $5,000 to $10,000. At this level, donors can start to designate their donations to support specific projects -- something that may not have gotten funding without their support -- and ask for specific information on how their funds were used. This can be the most gratifying form of philanthropy. And this is where having a strategy to analyze the nonprofit becomes essential."...

There are a number of ways to look into the financial health of a nonprofit. Guidestar.org lists more than one million charities recognized by the IRS, including descriptions of their mission statements and programs, as well as scanned copies of the 990 forms they are required to file with the IRS. These forms show the organization's assets and liabilities, what it pays its top staff, how much money it gives away and how much it spends on overhead.

Charitynavigator.org analyzes key measures of financial strength, such as administrative and fund-raising expenses, for 5,000 cha
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Many new donors become obsessed with the idea of a charity's overhead. But this figure isn't always an accurate measure of how effective a charity is. For one, some nonprofits -- such as relief groups that need to mobilize a lot of supplies and staff at short notice -- may have high overhead. "Do you know what the management overhead is for Lexus or Cadillac?" asks Mr. Thurman. "You don't care, because it's not why you buy the car. It's for maintenance or prestige or safety, and it's the same with charity."

In general, experts say that a reasonable range for all operating costs ideally would be about 20% to 30% of a charity's annual budget. But be careful of claims that a group is spending 100% of its money on the services it provides. Charities sometimes shift overhead expenses into services provided to make it look like they are spending less on administrative costs.

There are other measures to look for: How much money does a charity spend to raise money? How diverse are its fund-raising sources? How much does it have in the bank? How much does its chief get paid relative to heads of similar nonprofits? In these areas, "you're looking for your comfort level as a donor," says Mr. Stamp...